Telecoms industry preparing for totally free broadband

There is no such as a free lunch, they say. But how about completely free telecommunications, including free connections?

Last week Carphone Warehouse rattled the cages of the telecom giants by announcing ‘free broadband’ and virtually unlimited landline phone calls.
Meanwhile BT has told The Guardian, that household telephone bills will soon be consigned to the technological dustbin of history.
Matt Bross, BT’s chief technology officer, said: ‘Within five years I can see that people will not pay for phone calls.’ And it seems broadband just might be going the same way.

Robert McKinnon, who works for ZyXel, a Korean phone manufacturer, says many companies in the telecoms market are now working towards a model where broadband and phone calls will be totally free – unlike the Carphone Warehouse ‘free’ model where the consumer still has to pay monthly charges £11 for line rental and £9.99 for their phone calls.

The cause of much of this heady Spring sales madness is of course Voip, the technology that has appeared out of nowhere in the last two years.

Voip, or Voice Over Internet Protocol, lets people make phone calls via the internet either for free – if made between Voip-enabled computers – or at very low cost if dialing into the standard telephone network.

The rapid public acceptance of this technology has sent a shudder down the spines of ‘the incumbents’ – companies like BT and NTL Telewest in the UK – who are now falling over each other to proclaim that it is data rather than voice that now interests them.

The industry statistics tell their own story.

According to IT analysts Gartner Research, the number of calls made on landlines in 2004 fell by 10%; this year it is expected to fall by 20%.
Meanwhile the revenue from landline calls is expected to fall to just 50 or 60% of what it is today by 2010. The main beneficiary will be the mobile, though 36% of those calls already lost to landlines have migrated to the internet.

Gartner predicts that one third of Europeans and Americans will have ditched their old fixed phone lines by 2009 and will be using mobile and internet telephony instead. The report also says that 70% of voice connections around the world will be wireless by 2009.

Colin Duffy, chief executive of Voipfone, a telecommunications company
specialising on providing low-cost voice lines to small businesses, says such figures herald a revolution in the way the consumers and businesses alike look at communications.

‘Voice has just become another piece of data on a network that the customer is already paying for. It is the new companies who are going to grow around that network and who will produce the new phone companies,’ he said.

Duffy added: ‘This is a significant change for companies such as BT – because up till now most of their revenue has come from the retail sector. But BT really does not have much choice.’

However, it is not only the traditional landline operators who need to fear the communications potential of the internet.

Mobile phone companies are also vulnerable because of the development of
WiFi phones and instant messaging services on PDAs that allow people to make phone calls via wireless access points on the broadband network.

Already a radical new organisation called FON that has received EU funding is trying to develop a free worldwide wireless network.

Indeed, with the emergence of the new WiMax technology, routing many mobile phone calls via the internet using a comprehensive wireless network has become a real possibility.

WiMax – Worldwide Interoperability for Microwave Access- is claimed to be far more robust, secure and powerful than standard WiFi, and is able to offer services over ranges of several miles at speeds of up to 10Mbps speeds.

Some believe it could prove to be the kiss of death for 3G technology.

Already companies such as the German computer giant Siemens are developing what is known as an intelligent mobile phone. Tim Bishop, the company’s head of strategy, said: ‘Like many manufacturers we are exploring the development of intelligent phones that could be combined GSM, 3G and WiFi devices – and which will be underpinned by Voip technology.

‘The phones will be intelligent and just seek out the cheapest service.’

At current rates it is hard to see how the cheapest will not be those routed by the internet.

Indeed BT’s Matt Boss even predicts that before long all mobile phone calls too could eventually be free.

He says ‘We can ..see that those people who make a lot of mobile phone calls will do so from the web – and because of that we are aiming to put more services into data devices.’

Consumers will naturally be delighted at the possibility of free broadband and free fixed and mobile phone calls, but there is just one small potential snag; if everything is free then who pays to keep the internet running?

Katja Ruud, Gartner Telecoms Group research director, says though the traditional telecoms companies were slow to tackle the question of losing customers from their voice networks, this is now a question that is preoccupying the entire industry.

‘The thing is that nothing is free,’ she says. ‘The incumbents are looking at bundled revenue models that will let them offer subscription packages made up of voice, mobile, internet and video for the consumer and mobile desktop and applications for the business user.’

She adds: ‘I think that if anyone tries to break those models then things will follow the Nordic model – and the innovator will be bought by the incumbents.’

This prospect has already prompted directors of many Voip companies to dream of seven figure bank accounts and it is understood that some such companies have already been approached by Telecom giants.

Meanwhile BT and NTL Telewest have already started to respond to this new-look world.

Last Christmas BT announced that it was to spend £10bn on its 21st Century network while NTL Telewest recently announced that it is to roll out a full multi media package that will give its customers internet presence, video and TV, instant messaging, file sharing and features to manage time and availability.

BSkyB too is intent on becoming a major player in the so-called converged broadband/TV market.

Voipfone’s Duffy, a former BT top executive, claims the aim of such firms will be to lock customers into new ‘walled gardens’ where they will get all of their media services from one place.

‘Just as with computer operating systems, bank accounts and TV remote controls, people get used to what they know and are reluctant to change because of the hassle,’ he says.

Yet even so the large companies may not have it all their own way.

According to NTL Telewest, one of its aims is to provide the same sort of people with the same sort of computer access that they can expect when they are at work – which is exactly what companies like Urban WiMax is also aiming to do.

‘People are coming to us because they want an alternative route to the internet, that’s the reason that 40% of our customers give us,’ said Sasha Williamson, managing director of Urban WiMax, who are making use of WiMax technology to offer broadband solutions.

The wireless technology used by Urban WiMax can provide the broadband performance to compete with giants such as BT and NTL Telewest, and supports another emerging trend that the broadband suppliers are keen to develop – the use of remote applications by home and virtual offices.

Already being developed by IBM and Microsoft, ‘on demand computing’ is the final part of the fixed cost package that will allow businesses to control costs.

‘It’s very attractive to a start-up business,’ said Bill Duncan of SecureVirtualOffice. ‘They can get the latest software, host their data safely and do it for a small one-off cost when they want it.’

Meanwhile, fears that the eventual abolition of phone call charges may threaten the future of the internet’s infrastructure are played down by Brough Turner, one of the Voip community’s leading thinkers. He says that despite the opposition of large companies soon everyone will be plugged in automatically to the network.

‘The costs of the internet backbone are several orders of magnitude less than the costs of the telephone network,’ said Brough Turner. ‘Once you get to the backbone you are away.

‘The telecom companies are using Government and the laws that stop you digging up the road from getting to the exchange,’ he says.

‘But there are house builders in the US who are now offering houses for the high-tech entrepreneur that for an extra $1,000 now have fibre to the exchange. Direct links from houses to the backbone are going to happen.’

Carl Ford, vice-president of community and content for Pulvermedia, the company started by Jeff Pulver, the man widely acclaimed as the pioneer of Voip technology, points to what may be the only workable business model for the broadband industry in the future.

‘People will have to come up with completely new ways of making money – trying to charge for access is old thinking.

‘Google are making money because they are offering direct access to people who want something to people who want to sell something. That could be the future.’

All of which raises the intriguing prospect of Tesco or Sainsbury’s offering free broadband connections in return for a customer using their home page.